Episode 252: Unveiling the Art of Due Diligence with Bill Wiersema
In the world of mergers and acquisitions, due diligence plays a critical role in ensuring the success and sustainability of a deal. It involves scrutinizing financial data, examining operational aspects, and identifying potential risks and opportunities before finalizing an agreement.
Bill Wiersema, an experienced audit principal with Miller Cooper, is a highly regarded M&A advisor specializing in closely held middle-market businesses and private equity groups. With a wealth of experience and expertise, Bill is sought after for his innovative approaches in accounting, tax, and M&A matters. He prides himself on staying up to date with the latest industry trends and regulations, providing clients with valuable insights and solutions that align with their best interests.
THE ART OF PROBING AND EXPERIENCE
The world of due diligence is a fascinating blend of detective work and forensic accounting. Due diligence is an art form that demands experience and expertise. Bill draws an analogy between due diligence and probing a wall to find weak spots. Similarly, due diligence professionals must carefully probe and question data to identify potential issues and risks. It's an art that can't be mastered overnight; rather, it comes with years of experience in dealing with complex financial scenarios.
One of the key challenges in the due diligence process is striking a balance between the need for detailed information and the practicality of maintaining deal momentum. It is important to keep the process efficient, while ensuring that all crucial aspects are thoroughly examined. Decisions on how deep to go in due diligence require careful consideration, as spending too much time may delay the deal, and too little may lead to undiscovered risks. The key lies in smart resource allocation and identifying critical areas that demand further examination.
THE EVOLUTION OF DUE DILIGENCE
In the past, sellers were sometimes hesitant to provide detailed information to buyers, especially when dealing with larger entities. Due to high-profile corporate scandals such as Enron and WorldCom, however, buyers now demand more transparency and thoroughness in due diligence. The shift in perception has resulted in a positive change, as buyers now understand the importance of comprehensive due diligence in making informed decisions.
Apart from financial aspects, due diligence also involves evaluating cultural compatibility and employee welfare post-closing. Sellers are increasingly concerned about their employees' well-being and whether the buyer's company culture aligns with theirs. Buyers with a track record of treating employees well and maintaining a positive work environment often gain an edge over financial buyers solely driven by the bottom line.
Transparency and comprehensive documentation have become vital in building trust with buyers, especially in deals involving larger entities. As the world of M&A continues to evolve, due diligence will remain a critical aspect in determining the success of deals and ensuring the interests of all stakeholders are safeguarded.
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Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
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